Income inequality and environmental degradation in Egypt: evidence from dynamic ARDL approach.

ABSTRACT

Over the past four decades, the Egyptian economy has suffered from both income inequality and environmental degradation. This dual problem raises the question about the nature of the relationship between inequality and the environment in a developing country like Egypt. In this regard, the study aims to examine the impact of income inequality on carbon emissions during the period 1975-2017. The analysis considers the ability of the political economy approach compared to the Keynesian trade-off approach to explain the inequality-environment relationship in Egypt. To do this, the novel dynamic autoregressive distributed lags approach is employed to capture the short-run and long-run relationships and to overcome the complications associated with the structure of the widely used autoregressive distributive lags model. The findings show that the relationship between inequality and CO2 emissions is not a trade-off. Rather, inequality leads to environmental deterioration in the long run, but there is no significant effect in the short run. In the long run, a 1% rise in the Gini coefficient increases CO2 emissions by 2.28%. These results support the political economy approach in explaining the inequality-environment nexus. Hence, the economic development policies adopted in Egypt during the past four decades have led to a negative impact on the environment. The study advises economic policy makers in Egypt to adopt income redistribution policies to reduce the severity of income inequality. Improving income distribution has a positive effect on the environment in Egypt.